#8 in our “Key Solar Concepts” series.

Solar tax exemptions are the quiet workhorses of the solar incentive game. Sure, rebates and tax credits get all the glory, and SRECs can net you hundreds of dollars a year through online sales, but all of them are very complicated. Tax credits only work for people with enough income to take advantage of them, rebates vary widely and sometimes pay you back slowly, and SRECs are financial assets that are subject to arcane rules and sold by middlemen who take a cut.

Solar tax exemptions, on the other hand, are (mostly) really easy. They come in two flavors—property and sales—and are notable because they require essentially no work on your part. 24 states have a sales tax exemption (or no sales tax at all), and 33 states offer some sort of solar property tax exemption. Here’s a list:

So what’s the big deal with tax exemptions, anyway?

The big deal is that tax exemptions save you money on the upfront and longterm costs of solar. Conversely, people in states without solar tax exemptions pay more upfront and over the long term. Here’s a table of the additional costs of a typical 5-kW residential system in states without sales tax exemptions (highest added cost first):

State

State Sales Tax Rate

Cost to install solar/watt

Cost added to 5-kW system

California

7.50%

$4.25

$1,593.75

Mississippi

7.00%

$4.00

$1,400.00

Arkansas

6.50%

$4.25

$1,381.25

Illinois

6.25%

$4.25

$1,328.13

Kansas

6.15%

$4.25

$1,306.88

Idaho

6.00%

$4.25

$1,275.00

Kentucky

6.00%

$4.25

$1,275.00

Michigan

6.00%

$4.00

$1,200.00

Pennsylvania

6.00%

$4.00

$1,200.00

South Carolina

6.00%

$4.00

$1,200.00

West Virginia

6.00%

$4.00

$1,200.00

Nevada

6.85%

$3.50

$1,198.75

Utah

5.95%

$4.00

$1,190.00

Washington DC

5.75%

$4.00

$1,150.00

Maine

5.50%

$4.00

$1,100.00

Nebraska

5.50%

$4.00

$1,100.00

Texas

6.25%

$3.25

$1,015.63

North Dakota

5.00%

$4.00

$1,000.00

Virginia

5.30%

$3.75

$993.75

North Carolina

4.75%

$4.00

$950.00

Oklahoma

4.50%

$4.00

$900.00

Missouri

4.23%

$4.00

$845.00

Alabama

4.00%

$4.00

$800.00

Georgia

4.00%

$4.00

$800.00

Hawaii

4.00%

$4.00

$800.00

Louisiana

4.00%

$4.00

$800.00

South Dakota

4.00%

$4.00

$800.00

Wyoming

4.00%

$4.00

$800.00

As for property taxes, that’s a bit harder to figure out. Property taxes are assessed at the local level, based on lots of rules and regulations. They’re calculated differently everywhere, too; some are based on the assessed sale price of the property, and some a based on the potential income you could net from it. Suffice it to say that exempting solar property from taxes is the right thing to do.

The key here is that solar panels add value to your home. You can click on the link to read more, but the gist of of that article is that homes with solar sell for more money, and they sell faster, too. Here’s a chart based on the data from the linked article:

Pretty cool, huh? Studies of home price increases resulting from solar installation have been conducted in a few states, so we tend not to extrapolate that data for the whole country. What we use instead is a standard estimate for home price increases based on 20 years of free electricity at the current retail rate. It works surprisingly well to predict the kind of value bump you can see from installing solar.

Here’s the formula we use to calculate expected electricity generation for 20 years:

Avg. electricity cost per kWh

x

Annual insolation (kWh/m²)

x

.78 (electricity losses due to system design)

x

20 years

Below is a table that shows how that all shakes out, with values rounded to the nearest thousand dollars. Keep in mind that you can be taxed on the value added by solar in states that have no exemption. That possibility relies on the fact that your city or state has developed a way to calculate that value. Check with your city or county assessor’s office to find out.

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Solar Power Rocks provides free comprehensive guides to solar policy and incentives for all 50 states and the District of Columbia, along with hundreds of helpful and informative articles about recent solar news and general information related to home solar power. For media inquiries, general questions, or to report an error, you can reach us here.